Most home shoppers who see a “For Sale” sign in the front yard of a home they are considering to purchase are not aware that more than just the house is being sold. In some cases, their own privacy and personal information is on the market the moment that they begin the buying process — whether they end up buying the home or not.

Buyers considering the purchase of a new home will often hire a home inspector to examine the home for them and report its condition. If you are considering the purchase of a new home and are looking to hire a home inspector, consider the inspector’s commitment to your privacy in addition to his other qualifications.

There are home inspectors who will offer lower fees to their clients as an incentive to hire them — and then sell private information about the home buyer (or the home) to third parties willing to pay them for this information, to make up for the lower fee. Usually, the home buyer is unaware that the home inspector is gaining from the sale of his private information. Nor is the home buyer aware as to whom or how many third parties their private information is being provided to.

If your home inspector is offering a variety of “free” add-on services in addition to his report of the condition of your home, chances are good that you’re private information (and information about your home) is being provided to an unnamed third-party.

Contractors who sell and install home alarm systems, for example, consider home inspectors to be a valuable resource for new customer leads and will reward them with cash and other incentives to provide them with the names, phone numbers, and addresses of new home buyers. Sometimes the home inspector will sell their clients’ private information directly to a contractor but may also sell the information to “lead brokers” who, in turn, sell the information to a variety of contractors and service providers.

Rarely are home buyers informed by their home inspector that he is profiting from the sale of their private information or to whom the information is being sold. At least one lead broker forbids home inspectors who provide him with private data about their clients from revealing anything concerning the inspector’s contract with the lead broker to the homeowner, which includes his “compensation” arrangements.

Many clients of home inspectors, some who are on state-sponsored “Do Not Call” lists, are unaware how the telemarketers calling them came to get their name while some are even more surprised to find door-to-door solicitors knowing to ask for them by name shortly after moving into their new home.

Not all home inspectors engage in this practice and consumers should ask an inspector they consider hiring as to whether or not he or she engages in the sale of private information about his or her clients. Added services that require personal information or client registration such as “free” short-term warranties or “free” product recall research are important red flags that should be explored.

If you choose to hire a home inspector who will be providing your information to any third-party for any reason, it is wise to have the inspector provide you with the third party’s name, address, telephone number and other identifying factors to ensure that you can contact them should you find yourself receiving harassing or unwanted solicitations as a possible result — and to trace any other parties to whom that party may have provided your information to, when necessary.

In this age of private information gathering by government agencies and computer hackers, consumers should be proactive in protecting their private information from being bought, sold and re-sold among various parties that are unknown to them. The purchase of a new home is no exception.

If you are a home seller who has accepted a bid from a potential buyer for the purchase of your home, there is likely to be included in your agreement a contingency for a “home inspection” to be conducted by a person of the bidder/buyer’s choice.

A home inspection is conducted in accordance with a “standard of practice” published by a state licensing board or home inspection association that defines what is and what is not included as a part of the inspector’s observations and reports.

Presently, in an attempt to “upsell” and increase profits from their home inspections (or as a marketing incentive used to promote inspectors who need the business) some home inspectors are offering an add-on service for potential buyer’s that they call “Energy Efficiency Reports”.

Unlike the home inspection that is performed in accordance with a set standard of practice, energy efficiency reports are generally subjective, performed by inspectors with little or no training or certification and are calculated from basic calculators known to be broad and limited in scope. These reports are mere guesses as to how efficient the home might utilize energy in the future if the buyer decided to purchase it.

Inspectors usually provide this service through the use of simple generic calculators (already available to the public, for free) to publish “instant” energy efficiency reports based upon a few general observations. Unlike legitimate energy audits performed by trained and certified energy professionals, these efficiency reports provide unreliable results that are based upon inconsistent and extremely limited observations.

Home sellers who are opening their homes to home inspectors for the purpose of complying with their contractual agreement to allow inspections of the property for the buyer’s use in the real estate transaction are almost always unaware that the inspector can also be using his time in their home to provide potential buyers with an “energy efficiency report” that can potentially interfere with the sale and/or sales price of their home.

Whether they are real or not, reported conditions that would reflect poorly upon the home’s projected ability to perform in an energy efficient manner are not necessarily “defects” but can easily be perceived as such by hesitant home buyers. Likewise, home buyers relying upon this type of report are equally at risk if using the information it contains to determine affordability or projected energy costs.

Homes that are properly priced and presented for sale could be misrepresented as being worth less to prospective buyers due to such reports – reports provided without the input, knowledge or permission of the owner of the home.

Home sellers and the real estate salespeople who represent them should take extra measures to ensure that the inspector that they allow into their home is not performing any additional inspections or providing any additional information that is not included in the scope of the contractually agreed home inspection.

When the home inspector has stepped across the contractual boundaries … and the information that he reports outside of the scope of the contractually agreed home inspection has damaged the home seller’s attempt to sell his home … the seller should seek competent legal advice to see how these damages can be recovered from the inspector and from any real estate professional that referred or otherwise promoted the unauthorized inspection and report.

The unprofessional and objective views of an untrained person producing “energy efficiency reports” do not necessarily contain accurate information and should not be used to negotiate a real estate transaction. Home sellers should take the extra step to inform their real estate agents that their permission for a home inspection does NOT include permission for “energy efficiency reports”.

Does it come as a surprise to anyone that many of those who would financially gain from re-building the home are spending heavily to lobby their state legislatures to fight laws that would prevent it from burning down?

New homes are being constructed with lightweight and flammable material, and many that I have personally inspected include building flaws that increase the risk of fire.

One common example is the loose electrical wiring buried under the blown fiberglass insulation in brand new homes that is more of “the rule” than an exception to the rule in many unregulated parts of Missouri. Another common flaw is the absence of arc fault circuit interrupters.

As stated in the linked article, above …

Designed to carry a greater load with less material, the prefabricated components are made from real or man-made wood fragments held together by glue or metal fasteners. The materials are commonly used to frame roofs and flooring. Assembled in factories and shipped to construction sites, these building components significantly cut down on construction time and cost. Builders also say the materials are better for the environment, because they use less wood, reducing deforestation.

But both real-life and test fires have shown that structures with lightweight construction burn much faster and collapse sooner than traditional solid-wood frame construction. That, firefighters say, makes fires harder to fight and shortens the time occupants have to escape a blaze.

“Not only is that second floor going to come down on your head in a very short period of time, the roof is going to collapse,” said Danny Hunt, fire marshal in Nashville, Tennessee, where he said roughly 90 percent of new homes use lightweight construction.

First, what is a “soft” home inspection report – and how can it do harm?

Many home inspectors that inspect homes for real estate transactions have built their businesses upon the referrals of real estate salesmen to stay in business. Since real estate salesmen make no money until a home actually sells, some inspectors feel compelled to assist them in selling the house they inspect in the hope for future referrals. To do this, they will ensure that their inspection reports do not “alarm” the prospective home buyer and possibly interfere with the sale of the home – with the hope and expectation of gaining favor and receiving more referrals from the sales agent.

The result is a “soft” report that is of little value to the home buyer who commissions it and potentially harmful to anyone who comes to depend on it. A “soft report” could result in a buyer missing out on important information that could affect their choice to purchase a home. This can lead to a serious financial loss.

The following are a few common methods used by some home inspectors to “soften” their home inspection reports:

“Balancing” the Report

The most common method used to “soften” a home inspection report is to add “positive” things about the home that would be attractive to the buyer. I have had some inspectors tell me that they actually strive to include one positive feature of the home for every material defect that they find in order to “balance” the information.

Most experienced and professional home inspectors already take into account the fact that their client has found features of the home that attract them or they would not have contracted to purchase it. Professional inspectors know that they are hired to describe the home’s condition and report material defects that could affect the health or safety of its occupants as well as the sustainability of the structure.

They will perform this service by providing a home inspection report that is complete, accurate and totally unbiased.

Sandwiching information about hazardous or defective conditions between flowery comments is not the proper way to write a home inspection report.

“It Wasn’t in the Code Book, BackThen“

Another common technique used to minimize a material defect in the mind of a potential buyer is for the inspector or real estate salesperson to point out a serious material defect in the home and then infer or suggest that it is somehow more acceptable since it was not required by the code or building standards at the time the home was built.

Understanding that building codes are simply little more than basic minimum standards of which anything less is illegal … the fact that something harmful may have met or did not meet a code at the time it was built has no relevance to the owner, today.

Estimates

Another way that an inspector can take the “sting” out of a description of a material defect to soften a report is to include an estimate of repair to help the prospective buyer apply what is called “context” to the defect. This is not common to most home inspection reports, but it happens in some cases.

Watch for these code words that home inspectors use to alert interested real estate salesmen that they will write a “soft” home inspection report in exchange for future referrals … something that one court referred to in one recent lawsuit as “consumer fraud”.

Among some home inspectors and the real estate agents they work with is an “understanding” that first-time home buyers are sometimes easy to frighten or “alarm” when they learn of imperfections with a house they intend to buy. Some home inspectors address this as they solicit referrals from real estate agents by advertising themselves as friendly to first-time home buyers and provide an assurance that they do not “alarm” them in the manner that they describe defects in their reports.

Learn more about the bad results that come from this act of “consumer fraud” … from this lawsuit (click here) … that resulted from a soft home inspection report given to a first-time home buyer who got burned.

“Free” Warranties and ” Guaranteed Buy Back” Offers

It makes sense for a real estate salesman to want to take some of the worries out of taking a chance on a new home. Many will encourage or enhance the sale by providing “home warranty services” that may or may not cover items that stop working when the new homeowner takes over the property. Some will offer to buy the house if they can’t sell it … or “buy the house back” if you don’t like it, with (of course) a long list of certain disqualifying conditions.

While most home inspectors are careful to inform their clients that they are not providing or implying a guarantee or warranty through their inspection reports, many will want to impress real estate salesmen with the appearance of assisting them in providing an incentive to buy. Accordingly, they will purchase “90 Day Home Warranties” or provide “Guarantees” that are supposed to cover selected systems within the home against defects for a very low cost ($5 to $15) and will provide them to their clients with paid home inspections.

These low-cost service contracts promising high-end payouts are a common source of complaints with state-level consumer advocacy offices (attorney general, BBB, etc.) and should be carefully scrutinized. Even when they appear to be provided “free of charge”, reliance upon them when deciding to buy a home can be extremely costly.

In addition to the exclusion laden free “warranty” is the recent promotion where some home inspectors offer to “buy back your house” if they miss a defect in their report. If you really … really … believe that your home inspector can afford to “buy back” every house that he inspects charging his $300-ish inspection fee, then go ahead and take comfort in his offer when deciding to buy a home. If, however, you are suspicious as to why he will NOT promise to pay to replace the broken water heater he failed to detect for $500 but is willing to “guarantee” to buy back the house for $300,000.00, instead … look carefully at the hundreds of exclusions that assure that no such transaction can ever take place.

When the home inspector … the person hired and trusted to report things that might be wrong with the house that one intends to buy … begins providing “free” incentives to help the potential buyer decide to purchase the home by addressing future recalls of appliances or “free warranties” should things break, this could indicate that someone other than the home buyers’ interests is being considered.

The use of these so-called “warranties” along with other gimmicks (such as ongoing updates on the recall status of appliances, alarm system evaluations, etc.) assist some home inspectors who wish to solicit additional referrals from real estate salespeople in promoting the sale of the home by furthering the sales agent’s presumption that the prospective buyer will decide to buy the house. Carefully read these “warranties” and “guarantees” to see that they actually provide the intended coverage. Many don’t.

While these gimmicks have little to do with reporting the present condition of the home … they can go a long way in helping a sales agent create a mindset of “ownership” that advances the sale of the home. This is why some inspectors, according to their conversations in private sections of professional forums, promote their use as “marketing tools” to solicit more real estate agent referrals. “Agents love them” is a mantra for those who promote them. One vendor who sells the “We will buy back your house if we miss something” goes as far as to promise participating home inspectors that “every” real estate agent he solicits will provide him with “every” client they serve as a referral. Some home inspectors believe this and are willing to take a shot.

Home buyers should ensure that the company that is representing these service contracts is properly registered with their state and should not hesitate to hold the inspector that provided it to them responsible for the provider’s failure to perform under the contract – since it is being provided as a part of the home inspection service that they paid for. Here is a lawsuit where the home buying victims of a “soft” home inspection report with a 90-day warranty did exactly that … (click here). A “We will buy your house back” guarantee would also exclude the conditions described by the duped homeowners in this suit.

Caveat emptor.

What Should You Do (and NOT Do)?

Do your best to seek an experienced, full time and certified inspector, but be aware that even highly experienced and “credentialed” home inspectors can still be found to participate in writing soft reports or using gimmicks in return for future referrals.

While I personally know some excellent home inspectors who have scaled down their businesses for various reasons and continue to do quality inspections on a part-time basis … I know many others who have yet to reach a level of skill and expertise upon which they are able to confidently rely upon or fully commit themselves to be a home inspector on a full-time basis — yet these inspectors somehow expect others to place confidence in that level of skill and expertise to such a degree as to rely upon them to make the largest single purchase that many are likely to ever make in their entire life.

Use the internet to do your research and if you prefer to have someone refer an inspector to you, seek advice from friends or family who have had personal experiences with professional home inspectors.

Be skeptical of referrals for home inspectors from real estate agents or anyone else who has a financial interest or stands to gain from the sale of the home. Often, home inspector referrals come in the form of lists that will contain the names of inspectors known to the list provider to write soft reports or will be simply a list of inspectors who were willing to pay the real estate broker or agent a fee to appear on their referral list (click here). If one chooses to rely upon the recommendation of a real estate salesman for a home inspector and they provide a list of inspectors that they prefer to have a home buyer work with, it is not a good idea to go through the list simply searching for the inspector with the lowest fee.

Instead, home buyers should seek information about the inspector’s qualifications, length of experience, certifications and whether or not the inspector is committed to business on a full-time basis since some only perform inspections sporadically “on the side” from their other full-time job. When a home inspector adds a “free” gimmick to an inspection report such as a 90-day “warranty”, he should be asked how he has come to the conclusion that the buyer has decided to go forward with the purchase prior to having read his inspection report.

He should also be asked why he would be involved in matters, regarding future performance or recalls of appliances in a home, that he alleges his report to be exempt from. Using these selection criteria, the best inspectors will stand out quite readily. Still, one should remember the “code words” when reviewing his advertising and his reports.

Like this:

[Note: In 2008, as a certified real estate inspector, I wrote the following to assist my clients and potential clients who were using my reports. It was quickly copied and re-printed by many other inspectors and I still find it, from time to time, on various web sites … both with and without citation of the original source (me) of the article. Here is the original article as it was first written.]

In random order, I present to you seven different ways in which a home inspection report can be used by parties to a real estate transaction for advantage and benefit.

1. Buyers can consider the reported conditions of the home’s systems to determine their ability to afford to maintain the property. A home with a 12 year old water heater, an 18 year old furnace and a 25 year old composite shingled roof is going to need some costly investments in the near future.

2. Buyers can sometimes use information regarding undisclosed defects to negotiate the seller’s action to repair the defect(s) or adjust the asking price for the home.

3. Sellers can obtain a home inspection and use the report to disclose known defects to potential buyers.

4. Sellers can obtain a home inspection and use the report to identify and correct significant defects that could interfere with a buyer’s desire to submit a contract to buy the property.

5. Buyers can use the inspection report as a “punch list” or “to do list” for maintaining the property after purchase.

6. Buyers/Sellers can use the report to communicate to contractors the nature of the defect(s) to obtain estimates for repair or to arrange for repairs or replacements.

7. Buyers can sometimes use the inspection report as a means to withdraw from the contracted agreement to purchase the home when certain types of undisclosed defects are reported.

Buyers and sellers should consider obtaining inspection reports only from professional full-time home inspectors. Inspection reports generated by builders or contractors are often used by them as marketing tools and a means to generate business for maintenance and repairs and do not always represent the actual conditions of the property.